CHAPTER ONE
INTRODUCTION
Compensation
Management is one of the most complex and dynamic issues in organizational performance.
For an organization to achieve its stated objectives, there is the need to
effectively manage compensation, taken into cognizance one of the core aspect
of resource management known as compensation management (Anyebe, 2003). The
ability of a manager to achieve its stated objectives to a large extent depends
on the effective implementation of compensational packages in order to motivate
the subordinates and employees within and beyond their expectation.
Compensation Management plays a crucial and functional role because it is the
heart beat of human resource management. It is also vital to both employees and
the employer (Begbie, Bussin, &Schurink, 2011). This is because employees
typically depend on wages and salaries, and must be equivalent to the work
done. However, to managers, compensation decisions influence the cost of doing
business and thus, their ability to sell at a competitive price in the product
market (Barry et al, 1995) It is an obvious fact that effective implementation
of favorable compensation management will not only aid in stabilizing and
retaining employees but also helps in reducing labour turnover within the
organization. Employees’ compensation can be seen as all forms of financial
returns and tangible benefits that employees receive as part of an employment
relationship. It can be referred to as the totality of the financial and
non-financial rewards an employee receives in return for his/her labor or
services (Bernadin 2005).
Sola &Ajayi
(2001) see compensation management as a process of establishing the structure
of wages level for the various positions designing incentive systems, setting
individual wages and incentives within the established structures. It is an
integral part of human resources management that affects the performance of
employees because it establishes the degree of relationship between employer
and the employee. The manufacturing sector is one of the sectors responsible
for the food and beverage industry. It is one of the sub-sectors of the
manufacturing sector but responsible for the manufacturing of daily products,
beverages, seasoning, convenience foods confectionaries and staple foods
(Harrison, &Liska, 2008).
The turbulent
management-labour crisis over continuous agitation for increased pay in the public
services all over the world is challenging public sector organizations to
utilize their employees more effectively to improve organizational performance
(Hewitt, 2009). In Nigerian Civil Services, pay has become the driving force
for seeking employment in the industry. It therefore becomes imperative that
organizations establish and adopt a compensation system that can motivate
employees to work while at the same time not eating too deep into the
organization’s resources New Delhi (Chiang, &Birtch, (2008). Remuneration
does not simply compensate employees procedures that will attain maximum return
on Naira spent in Compensation is payment in the form of hourly wages or annual
salary combined with benefits such as insurance, vacation, stock options, etc.
that can positively or negatively affect an employee’s work performance.
Compensation is the remuneration received by an employee in return for his/her
contribution to the organization. It is an organized practice that involves
balancing the work-employee relation by providing monetary and non-monetary
benefits to employees. Compensation is an integral part of human resource
management which helps in motivating the employees and improving organizational
effectiveness (Danish & Usman, 2010).
Employees are pivotal to the achievement of organisational goal and enhancing the competitive advantage of the organisation in the global world and within the industry where the business firm is operating. Hence the leadership role of the employee’s in achieving this cannot be underestimated and to this done adequate measure must be put in place by the organisation through well managed compensation structure (Pearce, 2010). Therefore, compensation management as one of the fundamental functions of human resource department is meant to attract, retain, developed employees toward attaining organisational effectiveness, efficiency and competitive advantage in the globalised world (Adeoye, 2001; Tsai, 2005; Adeoye, Elegunde, Tijani&Oyedele, 2012).
Compensation management is a veritable instrument that affects the decision of job applicants and employees within the organisation. It has aided the firms to achieve their competitive edge over their competitors in the industry (Heneman& Judge, 2000; Ivancevich, 2004; Hyondong, 2006). Furthermore, a lot of monetary resources are invested on crafting, organising as well as administering organisational remuneration arrangement. Despite its vital contribution toward the success and development of the firm, scholars and even practitioners have lamented that there is a slow pace in the advancement of compensation research (Heneman& Judge, 2000; Kersley& Forth, 2005). In most recent times, the plan release cum adoption of reward management, have gone through a major shift that are dramatic in nature. This has reflected the motivational aspect in the employees’ leadership roles and performance (Heneman& Judge, 2000; Purcell et al., 2003).
In the context of
organisational effectiveness, leadership roles cannot be underestimated and the
critical existence of an organisation is largely anchored on the leadership
that exists within the sphere of the firm. It is reiterated that the wire link
between the vision, strategic direction and change of the organisation is
leadership. Leadership has been in existence for as long as people on earth
have co-existed and it is present in all the cultures (Rukmani et al., 2010;
Fibuch, 2011). Bontis and Serenko (2009) and Ilies et al., (2006) viewed
leadership from the managerial perspective and opined that managerial
leadership is the grace to be able to encourage, arouse, mentally excite,
propagate, anchor, visibly coordinates the organisational goals, and show good
examples to subordinates. Articulate leaders must be ready to give feedbacks
about the different aspects of the subordinates’ effort that may have positive
result on self-efficacy, job satisfaction, and commitments of employees with
focus on areas of improvement (Shea and Howell, 2009; Jawahar, 2006;
Bontis&Serenko, 2009).
1.2 Statement of the Problem
In
today’s work environment, there is more change and uncertainty, there is
increased need for empowered employees, there is decline in traditional
incentives, there is rise of nontraditional incentives and there is increased
use of variable compensation. In organization, compensation is usually narrowed
to cash and as a result, employers only have a tunneled vision when it comes to
the issues of compensation for their employees. The company has also attempted
to give attention to employee compensation strategies. However, employees
themselves have failed to recognize the fact that their compensation is a
package and not only related to cash. The byproduct of the above understanding
of compensation strategy is that it is managed to a moderate extent and most of
the time employee performance could be affected and vice versa. The study
therefore sought to address this gap by investigating the effect of
compensation management in organizational performance.
1.3 Objective of the Problem
The main
objective guiding the study was to investigate the effect of compensation
management in organizational performance: a case study of Copen Group
The
specific objectives are:
1 to
determine the extent at which compensation management affect employee’s
performance in Copen Group
2 To access the rate at which welfare services affect
employee’s performances in Copen Group
3 To explore relationship between compensation
management and improved productivity in Copen Group
4 To
explore the relationship between compensation management and retirement of
staff in Copen Group
INVESTIGATION OF THE EFFECT OF COMPENSATION MANAGEMENT IN ORGANIZATIONAL PERFORMANCE: A CASE STUDY OF COPEN GROUP
